There are plenty of great things to love about being self-employed, from the flexibility in working for yourself, and the chance to concentrate on things you’re really passionate about, to not having to report to anyone else, and so on.
However, one of the issues that gets many small-business owners and entrepreneurs stressed out every year is cash flow. In particular, many entrepreneur worry about how to go about getting an injection of funds when they need it, and don’t really know the best way to find the right loan for their needs.
With the tightening of banking lending criteria meaning it has been harder to secure funds from banks in the past decade, and with more and more small businesses trying to compete for money, it’s no wonder that the topic has been a difficult one for so many owners.
However, there are a number of things that entrepreneurs can do to make it less stressful to get a cash injection when needed. Whether you’re looking into a line of credit to help ensure a consistent cash flow this year whenever you need it, or want to instead secure a large loan to pay for a new storefront or expensive machinery, it’s important to do everything you can to make the process easier for yourself. Read on for some tips you can follow today.
Search for the Right Loan Before You Actually Need It
Firstly, you can immediately reduce your stress when it comes to loans by searching for funding well in advance of your actually needing it. Trying to secure a loan for your business under tight time constraints, when you really have to have the cash if you’re going to keep your doors open or undertake the particular project you want funds for, is a recipe for stress, as well as likely to negatively affect your chances of success.
For example, if you try to get a loan in a hurry, you will likely rush through the collation of your relevant data and filling in of forms, not search for the right lender or terms, and end up not meeting set criteria or impressing the lender you apply to.
As well, if instead of rushing you give yourself plenty of time to search for a loan, you will have the chance to build relationships with key contacts at the lending organizations you’re keen to work with. By taking the time to develop contacts in the right places, you will increase your chances of not only getting a loan, but of being given better terms for it and having your application approved quickly.
Research the Various Lenders and Loan Options
Next, it is important that you don’t just apply to the bank that you currently have your accounts with or that you fill in a loan application at the first lending institution you see. Instead, you should research many different potential lenders so that you can find the ones where you will have the best chance of being approved and that will give you the best terms.
Different organizations have different rules and regulations, after all, when it comes to how they lend money, so some places wouldn’t even think about approving your application while others would have no issue with doing it quickly. As such, it’s important that you search for the best fit for your needs and situation. Doing this will, in turn, reduce the amount of time and stress involved in getting a loan.
Don’t forget, too, that there are many more lending options these days than just the banks. In fact, alternative lenders often end up being the best options for small-business owners and solopreneurs. Apart from boutique online lenders, of which there are many, you might want to check out cash-injection sources such as crowdfunding sites (like Kickstarter and Indiegogo); friends and family members; and niche lenders specializing in certain industries or regions.
Another option to consider is a small-business line of credit. If you just need a small cash infusion here or there to tide you, and any employees you have, over between client payments or projects, a line of credit might be an option to consider. This will allow your business to function without taking out a loan while still giving you a way to draw in some funds during any lean times.
Have All the Necessary Paperwork in Order
Lastly, keep in mind that you likely won’t have any success with your loan application if you don’t put the effort into getting your paperwork in order before you apply. Typically lenders of all types won’t even think about approving an application if they don’t receive copies of your current business plan (with financial projections included), tax returns, and financial accounts.
In addition to supplying organizations with the balance sheet, profit-and-loss statements and other reports from your business, you may very well also need to provide your personal accounts, especially if you will be using your own assets as collateral for a loan. Lenders will also likely want to see information about how the funds will be spent, if the loan is approved, and how this cash injection will help the business to increase revenue as a result.
Lenders want to see that you will be able to pay back funds on time, every time, and in full. Providing comprehensive and up-to-date financial and planning information is a big step in proving this to them.